Rethinking Remittances: Sending money abroad

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A few weeks ago, we reached out to you on Twitter and asked if technology has improved the way you communicate with loved ones abroad. We heard back from a few of you, including David Colunga, in Houston, who spent his childhood in Mexico.

“For somebody living in the US it’s kind of hard to understand,” says David, “Technologies that are commonly used by everyone in the US, in a certain time, those in Mexico were just starting to develop. There was very little access.”

David grew up in the tiny town of Tula, Tamaulipas with his mother, while his father worked in the United States. Growing up, there wasn’t much phone or Internet access, so there really only one way to get in touch with someone.

“When I was a kid, my mom and dad communicated through letters,” says David. “They would send letters every week or every two weeks, so all the information each other knew about what was going on was a week off.”

But Tula did have some phone access, mostly in a place called La Caseta. “It’s this place where they had several phones,” David explains, “and people living in the U.S. would call this Caseta to talk to their loved ones on the phone.”

Of course, it’s the 21st century now and there’s greater communication access everywhere in the world. Facebook, for instance, now has well over a billion active users, as many users as there are people in China.

“In my case, most of my family, my extended family, I have them on Facebook, and plenty of times I have received messages–funny thing is it’s from the younger generation. One of my cousins will say, ‘Give my dad a call, he wants to talk to you.'”

These days, families video chat for through Skype, they message each other through free services like WhatsApp and Facebook Messenger. It’s become easier to stay in touch with people across borders than it’s ever been. But David Colunga isn’t sure that’s necessarily a good thing. “There is a downside though,” he says. “A lot of my friends have been the same friends I had when I left Mexico and I think sometimes that having this super easy and fast way to keep track and stay in touch with the friends you have in your home country, and sometimes it feels like it would hinder your ability, or just your time, to develop and get new friendships and new relationships, you know?”

But the fact is, it is easy to send messages across the border—and it’s easier to send money, too.

“Remittances to the developing world are a $410 billion industry,” says Edrizio de la Cruz, an entrepreneur who started his small digital remittance company in 2012. For comparison, the remittance industry itself is almost the size of the global airline industry. “From the United States, Latin America received $60 billion, just from the United States, so it’s just humongous.”

De la Cruz believes that traditional remittances channels are “inherently broken.” By that he’s referring to fees. Most companies, like Moneygram, Sigue and Xoon, take between 5 and 10%. While that might not seem like much, a monthly remittance payment to help family members abroad pay for utilities or groceries could result in hundreds of dollars a year—just in fees.

“The other facet is that of control and transparency,” says de la Cruz.
You don’t know when the money gets there.” It’s not even the responsibility of the remittance companies to notify you that your money was received safely, he explains.

“They have to literally pick up the phone and call you, ‘Hey, I received the money. Thank you.’ And that rarely happens.”

Edrizio knows all this because his family, who immigrated to New York from the Dominican Republic when he was a kid, used to send money home all the time.

My mother had always sent money back like clockwork to my aunt and my grandmother in Santo Domingo. What I noticed is that the process hadn’t really evolved in the past 20 years.”

Another legitimate concern in de la Cruz’s Dominican community is that senders have no idea how the people on the other side are actually spending the money they receive, assuming it does get there. “You don’t know what they’re gonna do with it,” he says, “gamble it away or it drink it away, something else other than what you intended.”

So de la Cruz did what any natural entrepreneur would do when confronted with a problem: he turned the solution into a business. His startup, Regalii, is located in Washington Heights in northern Manhattan, in the heart of the community he grew up in. (Regalii is play on regalo, the spanish word for “gift.”)

With traditional companies like Moneygram or Western Union, you just send money from one side to the other with no control over how that money is spent. The idea behind Regalii is that you don’t even have to send money home, you simply pay bills directly to the utility companies online. Bills can include things like cable, electricity, phone, even credit card bills.

Around the corner from Regalii’s office, Daisy Paolino’s international services company called GWB offers its customers the chance to use Regalii. But, she says, people are still beginning to just find out that it even exists. “People come here and they hear me talking about it and they’re like, “Really? You can do that?” she says.

While most customers come in to buy things like pre-paid international phone cards or to send Moneygrams, Daisy says customers come to pay bills using Regalii about three or four times a day.

Of course, because it’s just a website, anyone can use it themselves, but if GWB’s customers don’t have access to a computer or don’t know how to navigate the Internet on your phone, or even if they don’t have a credit card, they can come to her store, or one of the many like it, and pay international bills in cash.

For now, Regalii works because of community trust. Edrizio de la Cruz was born in the Dominican Republic, raised in a Dominican neighborhood, headquartered his office in that Dominican neighborhood, for a company that began by servicing his Dominican community—a community that exists both here and in the Dominican Republic. He even got one of the most beloved Dominican TV personalities, El Pachá, to rep his product.

And the company is growing. Through his service, users have paid close to two million dollars in bill payments in the DR alone, and the company is expanded to other countries like India and the Philippines. Still, the company is small, and de la Cruz says he feels a sense of isolation considering how few Latinos there are in the tech world. For example, he says, there are four times more women startup founders than there are Hispanic founders (regardless of gender). “And people say ‘women in tech is low.’ Yeah it’s low, but it’s still a lot bigger than Hispanics.”

Why does he think that is? “A lot of Latinos are new to this country. They’re one or two generations in, so typically you’ve already taken one big leap, so you’re somewhat reserved from taking that next big leap. That reservation sticks with you one or two generations until you’re stable. It’s very hard to say, ‘Okay I just got here, I’m going to do something completely off the beaten path!’

Another reason he points to is precedence. “[Latinos] don’t have an ecosystem that supports them.” Because there haven’t been many Latinos in the tech field in the past, there is no built-in institutional support to help the younger generation.

Getting Latinos working in the tech sector, of course, has to start with Latinos feeling an ownership of technology that they use (or don’t use), and that’s not always easy within a Latino cultural context.

David Colunga, for example, never used technology to send money home to Mexico, even though he admits it would easier. “The reason is the power of habit.” he says. “I just never developed the habit of using the internet for that. And then when I got into smartphones and the internet, I just never considered using them for that purpose.”

But companies like Regalii are interrupters of habit and are introducing a lot of Latinos to this new ideas like sending remittances online.

“It would be be very convenient,” admits David. “But I just never got into that, I don’t know why.”

So despite the high rates at which Latinos use mobile technology, some are still underestimating what that technology—technology that’s there right in their hands—is capable of.